Notes From Underground: Fresh FRA Podcast

Here’s another podcast from the Financial repression Authority I recorded with Richard Bonugli and Peter Boockvar. The ability for readers to listen to a free exchange of ideas is well worth the price paid to read Notes From Underground. Before you listen, I want to call your attention to an article from the Tuesday edition of the Financial Times, which of course, received little attention from the purveyors of PABLUM.

The article included comments from German Foreign Minister Heiko Maas, curated from an opinion piece he wrote for the Germany daily Handelsblatt. The German minister noted that Europe created an independent global payments system in an effort to prevent the U.S. from scuppering the Iran deal by squeezing European based corporations through the SWIFT payment system for transferring US Dollars. Maas said: “For that reason it’s essential that we strengthen European autonomy by establishing payment channels that are independent of the U.S., creating a European Monetary Fund and building up an independent SWIFT system.”
This is what ostensibly irritates China and Russia as the U.S. can strangle adversaries through the Treasury’s Office of Foreign Asset Control. The teeth in U.S. sanctions is the control of the global payments system for transfer of dollars.
On Wednesday, Chancellor Merkel publicly voiced support for her Foreign Minister’s proposal. This is of greater interest as Maas’s comments follow closely to Sunday’s meeting between Merkel and Putin.
Also from Germany, Bundesbank President Jens Weidmann delivered a speech to the Association of Foreign Press on Thursday. Besides Weidmann’s regular call for the rollback of the ECB’s QE in an effort to begin the process of shrinking the balance sheet and begin rising interest rates. Weidmann used the last paragraph of his speech to poke at those calling for increased shared risk in backstopping individual states public debt and private non-performing loans. Pay close attention to this sentence: “But those that are explicitly calling for more risk-sharing must also be prepared to relinquish more SOVEREIGN RIGHTS to the European level,” (emphasis mine).
This will be a key point going forward as the ECB tries to sort through its massive balance sheet of both sovereign and corporate debt.

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16 Responses to “Notes From Underground: Fresh FRA Podcast”

  1. Pierre Chapuis Says:

    How can they agree on a swift payment system, when they can’t even agree on shared risks? Rhetorical question

    • Yra Says:

      Pierre–putting theory into practice is the key to all accomplishments.But if the EURO were to gain the status of a hegemonic endorsed medium of exchange and store of value before the YUAN –well maybe the rhetorical will become the actual and possibly the virtual—

      • David Richards Says:

        Store of value? How quaint. We don’t need no stinkin store of value with policy driven equity markets.

      • Chicken Says:

        Fiat currency as a store of value is an interesting concept, what are the chances this becomes a priority of central banks?

        I guess if they were actually serious and not just intending on fooling people, the currency could be gold backed but then who could they steal from when they feel the urge?

  2. David Richards Says:

    Thanks for another broadcast which I will cherish instead of the piped-in kpop or cnbc in our gym. To be clear, the order of preference is
    1) FRA
    2) K pop
    3) CNBC.

    Watching my technical levels, I have EURUSD remaining bullish while above 1.143 and gold bullish near-term while above 1180 but needs 1236+ for bearish invalidation (EURUSD having already invalidated its bearishness).

  3. Arthur Says:

    How Venezuela could solve its hyper inflation???

    • Chicken Says:

      It’s not looking good, is it? GGAL keeps crashing as well. Not sure if that’s any indicator…. but the disease might be terminal?

  4. Chicken Says:

    Given reality is mediated through vision and the EU being comprised primarily of freethinkers, it seems plausible they attempt rescuing Turkey from financial duress and Putin from his sins.

    • yraharris Says:

      Chicken—that would be a stretch because the Italians would press for ever greater concessions –it would be amazing for Brussels to attempt

    • David Richards Says:

      “EU comprised primarily of freethinkers”…
      What are freethinkers, people who try to get stuff for free?

      • Chicken Says:

        David, I suppose that’s one interpretation.

        Yra, thanks for your suggestion.

  5. David Richards Says:

    Powell caves. The weak dollar looks sick. Momentum stocks have momentum. Capital flows reverse as outflows from US gather pace. Risk on. Everywhere.

    Party like it’s 2017 again, unless you’re an anti financial repression killjoy lol…

    Sha la la-la-la-la live for today
    And don’t worry about tomorrow hey.

    • David Richards Says:

      To elaborate on Powell’s “cave”, despite these negative real interest rates late in this business/credit cycle, rising inflationary pressures and signs of an overheated US economy, by emphasizing only “gradual” rate increases (which have clearly fallen behind the rate of increase in both consumer and asset price inflation), Powell caved to Trump’s demands to temper rate increases – or so it seems which is poor optics no matter Powell’s true motivation.

      Powell and the Fed’s willingness to allow inflation overshoots, per their own words, shows that any signs of any debt deflation almost anywhere strike far more fear in their heart than inflation, in stark contrast to the Bundesbank.

      Thus the foregoing is the leading fundamental case for higher asset prices, risk on and a lower dollar. That remains the primary trend, albeit not linearly, until the ever bigger debt bubble they’re blowing explodes, when the dollar will temporarily soar (in a kneejerk reaction) exacerbating the crisis before subsequently crashing too along with our increasingly unstable & unsustainable monetary system.

      As for Powell… Meet the new boss, same as the old boss. Won’t be fooled again.

      • Yra Says:

        David –really informative post –thanks.Debt deflation is the key and because Powell won’t use the phrase it is what strikes fear in the heart of central bankers at the effective lower bound—ELB—is Powell aware he has to stem the rise of the dollar to halt the slide in emerging market assets and while we have discussed ITALY for many moons the looming situation with Lega is a global disater unless the Germans absorb and enormous financial hit–when this takes place we don’t know but the time is nearing as the Italians will not abide a Greek situation as even Barron’s point out this week.Can’t turn back the hands of time ,so the People Get Ready ,There’s a Train of Comin’

  6. traveltrader Says:

    As a way to put maximum pressure on Iran after the US pulled out of the Iran nuclear deal, Trump is certainly using strong pressure on the Euro’s to not trade with Iran.

    The only thing the US has that can “force” the Euro”s to not trade with Iran is to lock them out of the US Dollar payment system if they do.

    Of course the natural response from the Euro’s is, “well, we will just create our own non-US Dollar payment system and use that.”

    Trump’s response of course would be, “either use the US Dollar Payment system, or be locked out of it forever. There is no middle ground, you are either all in or all out.”

    So with that posture, if the Euro’s don’t create their own non-US Dollar payment system, then they have shown their hand, they are just bluffing. I’ll bet the profits lost by not trading with Iran is very small in comparison to not trading with EVERYONE ELSE on the planet who is using the US Dollar payment system (SWIFT).

    Trump knows how to negotiate.

  7. Chicken Says:

    Tariffs…, surely the EU cannot be serious?

    “EU Official Proposes Dropping Car Tariffs”

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